Oil Acting Weak Over Last Month (USO, GLD, UUP)

The relationship between Oil, measured by the United States Oil Fund (NYSE: USO) and the US Dollar, measured by the PowerShares US Dollar Bull (NYSE: UUP), has been trying to tell us something over the past month.

Oil has been a decent hedge against inflation and a falling US dollar over the past couple of years. This is a similar relationship gold, as measured by the SPDR Gold Shares (NYSE: GLD) has with the US dollar.

In fact over the past 3 months Gold is up about 9% while the US Dollar index is down about 5%. A relationship you would certainly expect. Oil during this same period is up only 2.5%, while having the strong tailwinds of the increased belief the economy is improving and the US dollar reaching new lows.

Over the past 1 month period Oil is actually down 3%, a strong signal of underlying price weakness. If you take out either a further weakening of the dollar or a strengthening economy I can see significant weakness in Oil and a strong price trend downward.

Oil is down $2.37/barrel or 3.3% to $69.67/barrel in midday trading.